Southwest Air Financial Statements and Financial Ratios Analyzed from 2015 to 2019
Thanks for visiting my Southwest Airlines Financial Report page. On this page, you will be able to find preliminary information about Southwest Airline's current financial performance as well as some historical track records and trends.
For a more detailed examination of Southwest Airlines' financial performance, please check out the "Financial Report". In this report, written by myself, Paul Borosky, MBA., Doctoral Candidate, and published author, you will find:
- Summarized income statement for the last 5 years.
- Summarized balance sheet for the last 5 years.
- Summary analysis by myself of important income statement, balance sheet, and financial ratio trends and other happenings.
- Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
- Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
- Professional financial analysis tips provided in each section to help YOU conduct your OWN financial analysis!
- Each section includes an “in other words” segment. This is were I use plain English to explain concepts.
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Southwest Air Financial Statements and Financial Ratios Analyzed from 2015 to 2019
Southwest Air: Brief Summary
Southwest Airlines' home headquarters is located in Dallas, Texas. The organization competes in the airline industry. Specifically, Southwest Airlines directly competes in the industrials section of the industry. At present, the company employs about 61,000 people. Their CEO is Gary Kelly. Their main service provided is passenger airline transportation. Most recent statistics show that the firm caters to approximately 100 destinations in 40 states as well as the District of Columbia and Puerto Rico.
From a financial perspective, Southwest Airlines' stock prices have ranged from $29.15 to $58.83 in the last 52 weeks. Their market capitalization is about $18.8 billion. The company’s beta is 1.6. This indicates that the company’s risk is well above that of the overall market. The company does pay dividends, on a quarterly basis. Southwest airlines last dividend payout was $0.18.
Southwest Airlines Financial Report Sources
“Southwest Air 2019 Company Analysis: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA. and owner of Quality Business Plan. In this book, the author selected Southwest Air's 2018 10k, 2017 10k annual report, 2016 10k annual report, 2015 10k annual report, and Southwest Air's 2019 10k annual report as the basis for information gathering.
Section 1: Southwest Air Income Statement Analyzed 2015 to 2019
In this section, I walk through a broad definition as to what an income statement is and why it is important. From this, I then discuss and define income statement line items, such as revenues, gross profits, etc. in detail. After each line item is defined and discussed, I finally offer a summary analysis of Southwest Airlines’s important income statement line item trends from 2015 to 2019, in most cases.
Southwest Airlines ended 2015 with approximately $19.8 billion in revenues. In 2016, the revenues would decline to about $19 billion, which is a -3.8% growth rate. Fortunately, the organization turns things around, and in the next three years, consistently grew there revenues to approximately $22.4 billion. This would average out to be about a 3% annual revenue growth rate for the organization.
Southwest Airlines SG&A increased from $6.3 billion in 2015 to $22.4 billion in 2019. In terms of revenues, the company's overhead increase from 32% of revenues to 37% of revenues in the five-year time span. The significant growth rate for SG&A well exceeds the company's revenue growth rate. If this pace continues, their net profits could end up negative in the midterm. A better strategy would be for the organization to take action and cut operational costs. By doing this, the firm may be able to set a foundation for future growth expansion, while maintaining its overall operational cost at a set level.
Southwest Airlines Summary Income Statement 2019
|R & D|
Section 2: Southwest Air Balance Sheet Analyzed from 2015 to 2019
For Southwest Airlines's balance sheet, I again go through each important line item from the balance sheet. In reviewing each line item, I will define Southwest’s balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2015 to 2019. Next, I then offer an analysis of Southwest’s balance sheet important line items.
Southwest Airlines Cash Position
Southwest Airlines' cash position increase from $1.5 billion in 2015 to $2.5 billion in 2019. However, the cash position did fall in 2017 to $1.5 billion. As a percentage of assets, the cash position increased from 7.1% as a percentage of total assets in 2018 to 9.8% of total assets in 2019. This indicates that the organization is not fully utilizing its cash position. A better strategy would be to divest more of their cash into short-term investments. At least, the company will be making some interest off their cash holdings.
Southwest Airlines PP&E
Southwest Airline's property, plant, and equipment ended 2015 at approximately $24.7 billion. In the next several years, the company would grow its property, plant, and equipment to approximately $29.3 billion in 2018. In 2019 though, the company would liquidate some of their fixed assets to bring their position in at $27.7 billion. This would be a -5.3% growth rate. This action may very well be an excellent strategic move. In the last year, the company increases its revenues by about 2%. Further, the organization was able to lower its property, plant, and equipment by a similar rate. This shows that the firm is improving its overall asset usage and utilization.
Southwest Airlines 2019 Summary Balance Sheet
|Short Term Investment||1,524||1,835||1,778||1,625||1,468|
|LT Debt - Current||819||606||348||566||637|
|Total Current Liabilities||8,952||7,905||6,863||6,844||7,406|
|Total Equity & Liability||25,895||26,243||25,110||23,286||21,312|
Section 3: Southwest Air Financial Ratios Analyzed from 2015 to 2019
For this final section, I have chosen about 16 different financial ratios to calculate for Southwest Airlines from 2015 to 2019. I also review some important Soutwest's financial ratios. I first start with defining the financial ratio. Next, I supply the financial formulas for calculating the specific ratio. Finally, I offer a brief analysis of important financial ratios.
Southwest Airlines Current Ratio:
Southwest Airline’s current ratio ended 2015 at .54. In the next two years, the company would increase its current ratio of 2.7 in 2017. However, for 2019 and 2018, the current ratio would fluctuate from .64 to .67. This indicates that the company is attempting to increase its current ratio. However, the firm seems to be struggling with elevating it enough to bring along with finance standards, which is a 1.0 current ratio. In the next several years, investors should expect the current ratio to increase for the organization. If the strategy does not take hold, then investors may worry about possible liquidity issues in the short term.
Southwest Airlines Total Asset Turnover:
In 2015, Southwest Airlines had a total asset turnover of .93. In the next two years, their total asset turnover would fall to .79 in 2017. Fortunately, the organization, over the next two years, has improved his asset utilization. This has resulted in a .87 total asset turnover for 2019. If the company continues to liquidate underutilized assets, then investors should expect the total asset turnover to improve for the company continually.
Southwest Airlines Return on Equity:
Southwest return on equity ended 2015 at approximately 30%. The executive team was able to increase the return on equity further in 2017 to 34.8%. However, in the last two years, the organization's return on equity fell to 23.4% in 2019. There are numerous reasons for the decline in the return on equity. A possible reason is that the company is taking on less debt and utilizing more equity for operations and growth.
Southwest Airlines Debt Ratio:
In 2015, Southwest Airlines had a debt ratio of 11.9%. In the next two years, the company would increase its debt ratio to approximately 13.2%. For a mature company such as this, even at 13% debt ratio, this seems like an excessively low debt position. Further, the organization and would take steps to reduce its debt ratio even further. This would result in a debt ratio of 7.1% in 2019. A better strategy for the company would be to start taking on more debt as compared to reducing his deposition. If Southwest takes on more debt, they will be able to take advantage of low-interest rates in the marketplace. Also, by taking on more debt, this action will also drive up return on equity for investors even if the company takes on debt just to repurchase stocks. The results would be added value for shareholders through higher stock prices.
Southwest Airlines Liquidity Ratios 2019
|Net Working Capital||840||(282)|
Southwest Airlines 2019 Asset Utilization
|Total Asset Turnover||0.87||0.84|
|Fixed Asset Turnover||0.81||0.75|
|Days Sales Outstanding||17.67||9.44|
|Accounts Receivable Turnover||20.65||38.67|
|Working Capital Turnover||26.70||(77.89)|
|Average Days Inventory||0.12||0.13|
|Average Days Payable||0.04||0.04|
Southwest Airlines Profitability Ratios 2019
|Return on Assets||8.88%||9.39%|
|Return on Equity||23.39%||25.02%|
|Net Profit Margin||10.26%||11.22%|
|Gross Profit Margin||69.09%||67.87%|
|Operating Profit Margin||13.18%||14.60%|
|Basic Earning Power||11.42%||12.22%|
Southwest Airlines Long-term Debt 2019
|Times Interest Earned||25.06||24.47|